Marketing Evolution Same Budget, Better Results, Keys to Marketing in Turbulent Times Rex Briggs rex@marketingevolution.com June, 2009 0 Marketing Evolution MarketingEvolution.com | CONFIDENTIAL
The Fear of a CFO I will have to cut jobs to keep spending on marketing, but maybe marketing isn’t paying out like it should. 1 Marketing Evolution
“We did a wonderful spot…on the Superbowl… for Mitsubishi Gallant... that stops at the end and [says] go to “seewhathappens.com.” We got about 600,000 clicks. Was that great or that not great? We told the client it was great so it was great.” [nervous laughter] CEO of Top US Advertising Agency 2 2 Marketing Evolution
Half of the money I spend on advertising is wast the trouble is, I don't know which half. 3 3 Marketing Evolution
CFOs are uncertain about marketing: They wonder about the short-term versus the longer-term role of marketing, and the tough trade-offs they and executive teams need to make related to cash management. 4 Marketing Evolution
� Whisper into your CEO’s and CFO’s ear: – A bird in the hand may NOT be worth less than two in the bush – Danger in raiding marketing to make this quarter’s profit numbers – We are making marketing accountable and boosting marketing ROI 5 Marketing Evolution
Marketing Directly Impacts Sales & Cash Two Case Examples � Relatively New Brand Established Brand (Selling mainly to repeat purchasers) � Marketing accounts for 20 to 30% of � Marketing accounts for 5 to 15% of sales total sales � Personal Consumer Expenditure � Sales Down 3% in 2008. (PCE) Drives category trend would have been down 5% w/o � Should be down, but were up over marketing 10% due to aggressive marketing & � Peers down 5.7% pricing. Cutting marketing would cost � Synergy of strong marketing and strong promotional pricing delivered results (Pricing alone would not have achieved goals) 6 Marketing Evolution
Profit Impact from Increasing or Decreasing TRPs Optimal TV TRP Level = Optimal TV TRP Level = 24% over current level 24% over current level Sales simulation shows Sales simulation shows Incremental Profit more than $1 in return for more than $1 in return for ($Millions) each dollar invested up to each dollar invested up to ~24% incremental TRP’s ~24% incremental TRP’s Change in Total Incremental Budget % Contribution Profit Change in TRPs Simulations Change TRP’s ($Millions) ($Millions) Increase $5M 12% 3709 $ 520 $ 34 Decrease $5M -12% 2901 $ 610 $ (8) 7 Marketing Evolution
Marketing Evolution Marketing Investment Turns Explanation For How MUST HAVE: Into Cash 8
ROMO: Measuring Sales & Branding to Map Leading Indicators (Hypothetical Example) Brand Awareness 3) To get 8 million, need 15 million aware of the brand. Ad Awareness 2) To get 3 million, need 8 million consumers familiar with brand. Brand Familiarity 1) To make plan, need 3 million buyers with “purchase Intent” for my Intend to Purchase product Marketing Optimization Levers � Message & � Media Mix, � In-Store Optimized Consumer targeting & � Etc. Motivations Flighting Sales 9 Marketing Evolution, Inc.
Example Output: ROI Contribution to Revenue Television provides largest contribution to incremental revenue; CRM program and redemptive print generate strong returns on spend. Disguised / Illustrative Annualized contribution of measured marketing programs to incremental revenue CRM 2.5 14.9 Shelf Shouters Print 23.8 Print 67.5 0.7 3.4 3.5 15.9 TV 97.1 44.9 Advertising Costs Contribution to Incremental Revenue 10 Marketing Evolution
� Why statistical models of sales (traditional MMM) Are NOT the solution – Misses segmentation – Misses marketing strategies – Hazard of “Rear-view mirror” analytics when leading indicators are needed � To Evolve, you need to… – Measure the mind and the hands – Map out action standards, and work with leading indicators – Get more granular – at least by marketing objective by customer segment – Analyze consumer motivation, message, media (and ideally in- store) together, in one framework 11 Marketing Evolution
Ways to Generate Revenue Planting Seeds Harvesting Repositioning Brand New Launch � Awareness � Relevance � Brand Differentiation � Purchase Consideration � Sales � Advocacy Benchmark to Achieve Goals Current Campaign 12 Marketing Evolution
Brand Attribute Importance and Performance Identification of what’s important to customers, and how the client is performing against these key attributes. Purchase Impact (Importance) and Perceived Client Performance across Key Brand Attributes Disguised / Illustrative (Attribute Correlation with ‘Is a brand for me’ selection) Invest and Maintain Strength Build Impact on Customer Purchase Decision Attribute Category Emotional Value Health Taste Ride but Don’t Overinvest Dial Down Client Brand Performance (% Customers Rating Client as Top 2 Box Performance) 13 Marketing Evolution
Granular ROI Measurement: Media Tactics Contribution to NRx and TRx Understanding the specific impact of Company’s actual, in-market campaign against key components of the customer decision-making and purchase funnel. Disguised / Illustrative Customer Media Impact on Target Customer Purchase Funnel Purchase Funnel Television Magazine Online CRM Shelf Shouters Category Funnel Metric Impact Impact Impact Impact Impact Awareness +12% +6% +3%* +1%* -- Upper Familiarity with Brand +8% +3%* +8% +1%* -- Funnel +2%* +2%* +9% +3%* -- Research Product Intent to talk to Doctor +3%* +1%* +6% +4%* -- Receive NRx +7% -- +3%* +6% -- Lower Funnel Recommend +1%* +3%* +4%* +2%* -- +1%* +2%* +3%* +8% -- Renew 14 Marketing Evolution
Seven Areas of Marketing Upside Put the 1 2 3 Hit the reset infrastructure in Seven Areas of place to measure Marketing Upside button your marketing 15 Marketing Evolution
The Problem With Post-Mortem Analytics 16 Marketing Evolution
Marketing Evolution Ok… Now What? 17
Discussion: What is important Today’s discerning customer Timely ROI information is base & media environment Custom, no longer a luxury, it’s a require that ROI analysis be Timely necessity in today’s Granular customized, granular & deep economic environment Insights Accurate, Actionable ROI Insights The ‘purchase’ decision ROI analytics must be Holistic Credible is complex and long. highly credible to drive View action and buy-in across ROI analytics must consider the entire process the origination, with no room for error 18 Marketing Evolution
ROMO Case Study: Philips Norelco Problems/Challenges Market Share Decline Category Shrinkage Timing of Spend vs. Optimal Media Mix and Intra-Media Mix Unknown Threat of significant budget cut to marketing - Online Creative Mix - TV :30s & :15s - Radio Usage “We knew there had to be a - Optimal Timing of Spend better way than mix models and vs. Competitors brand tracking studies” 19 Marketing Evolution
Old Measurement Approach vs. New ROMO Approach Marketing Lagging Indicators Only Market Activity plan Lagging indicators: Sales & Profit Annual learning and optimization cycle ROMO Measurement Approach Learning and optimization cycle Market Activity Measure performance of the campaign Measure performance of the campaign while in field to make adjustments to while in field to make adjustments to improve the performance and ROI of improve the performance and ROI of Marketing Leading the campaign the campaign plan indicators : Lagging indicators: Leading indicators deliver rich Leading indicators deliver rich Sales & Profit diagnostic insights, by consumer diagnostic insights, by consumer segment which are unavailable with segment which are unavailable with lagging sales indicators lagging sales indicators Annual learning and optimization cycle 20 Marketing Evolution
The Need Real Time Learning Needed for In-Market Adjustments -Post Hoc Reporting & Marketing Mix Modeling aren’t enough -Need for “leading indicators” to make mid-course Industry leading ROI measurement, adjustments across media -Insight on consumer - Stakes too high to rely on anything Motivation, Message, & Media less mix 21 Marketing Evolution
ROMO Proactively Manages Ongoing Campaigns KPIs and Sales “Funnel” Metrics Tracked In-Market KPI #3 KPI #1 KPI #2 Upper Funnel Metrics Green Light: No Change Needed Lower Funnel Metrics Red Light: Change Needed (drill down on recommendations) 22 Marketing Evolution
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